DEPUTY GENERAL MANAGER
SEBI/DNPD/Cir-27/2004/07/16
July 16, 2004
To,
The Managing Director / Executive Director of Derivative Segment of NSE & BSE and their Clearing House / Corporation.
Dear Sir,
Sub:- Trading by FIIs in Exchange Traded Equity Index Derivative Contracts
This circular is being issued in exercise of powers conferred by section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with section 10 of the Securities Contracts(regulation) Act 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
This circular is in continuation with SEBI circular SMD/DC/CIR-11/02 dated February 12, 2002 issued to Derivative Exchange / Segment and their Clearing House / Corporation (hereinafter collectively referred to as Exchange).
RBI vide circular A.P.(DIR Series) Circular No.13, dated September 1, 2003 has specified that Foreign Institutional Investors (FIIs) may trade in all exchange traded derivative contracts approved by SEBI from time to time subject to the limits prescribed by SEBI. The existing FII position limits in equity index derivative contracts were reviewed by the Advisory Committee on Derivatives and Market Risk Management (Advisory Committee). The recommendations of the Advisory Committee were considered and approved by the SEBI Board.
Accordingly the position limits for FIIs in equity index derivative contracts shall be as under:
I. FII Position Limits in equity index derivative contracts:
Clause I of SEBI circular SMD/DC/CIR-11/02 dated February 12, 2002 on FII position limits in equity index derivatives stands modified as under:
i. FII Position limits in Index options contracts:
FII position limit in all index options contracts on a particular underlying index shall be Rs.250 Crores or 15 % of the total open interest of the market in index options, whichever is higher, per exchange.This limit would be applicable on open positions in all options contracts on a particular underlying index.
ii. FII Position limits in Index futures contracts:
FII position limit in all index futures contracts on a particular underlying index shall be Rs.250 Crores or 15 % of the total open interest of the market in index futures, whichever is higher, per exchange.
This limit would be applicable on open positions in all futures contracts on a particular underlying index.
In addition to the above, FIIs shall take exposure in equity index derivatives subject to the following limits:
a. Short positions in index derivatives (short futures, short calls and long puts) not exceeding (in notional value) the FII’s holding of stocks. b. Long positions in index derivatives (long futures, long calls and short puts) not exceeding (in notional value) the FII’s holding of cash, government securities, T-Bills and similar instruments.
II. Monitoring of Position Limits
1. The FII shall report to the Clearing Member (Custodian) the extent of FII’s holding of stocks, cash, government securities, T-Bills and similar instruments before the end of the day.2. The Clearing Member (Custodian) in turn shall report the same to the Exchange.
3. The Exchange shall then monitor the FII position limits in equity index derivative contracts in the manner specified by SEBI vide circular No. SMD/DC/Cir-11/02 dated February 12, 2002.
The Exchange shall implement the provisions of this circular w.e.f September 1, 2004.
Yours faithfully,
V.S.SUNDARESAN
